Why is payment management important for businesses in Germany?

In this article from Wise Business Group, we will talk about the importance of payment management for businesses in Germany. Companies’ ignorance of this issue will often lead to long waits to receive money from the customers and have dire consequences.

Read more on Wise Business Group: Start your business life in Germany.

The importance of payment management for businesses in Germany

Many founders in Germany know that it is essential to have detailed financial planning in the business plan to build the whole process of creating and developing the company on a solid foundation from the beginning. However, they should pay close attention to finances even after starting an operational business.

Payment and receivables management plays a fundamental role in maintaining a company’s liquidity in Germany. The survey’s results on the payment behavior of corporate customers in Germany also emphasize this issue.

According to the survey, more than 80% of the companies studied face payment delays, while the economic situation is good and stable.

If a large number of payments are not made on time, the company’s liquidity will likely be in a dangerous position.

Trends in payment behaviors in various industries in Germany

Most payment delays in Germany are related to export companies. Ninety percent of companies surveyed in this area face payment delays. The figures show that German companies usually have to wait up to 60 days after the due date to receive money from their customers.

In the survey, which we mentioned earlier, a total of 13 sectors and professions in Germany were studied, with fluctuations in payment delays averaging around 10%.

Accordingly, the textile industry with 94% is more affected by late payment than other industries in Germany. The lowest rate of delays is 75% and related to the automotive industry. However, this amount is still very high for companies. 75% delay in payment means that out of four customers in Germany, only one pays on time.

Therefore, it takes a long time to receive the cash to be in a company’s account in Germany. It can quickly and threateningly affect a company’s liquidity, especially in phases of business development where economic conditions are not so favorable.

 What are the reasons for the delay in payment by customers in Germany?

There is no doubt that the main reason for payment delays in Germany is the customer’s financial problems. Possible differences regarding the low quality of the product also play a minor role in less than 10% of cases. Fraud is also seen in about 4% of late payment cases.

However, in international comparisons, the payment period of German companies is relatively short. More than half of the companies have stated that they set a payment deadline of up to 30 days. Overall, 92% of companies in Germany offer a maximum 60-day payment deadline for their customers.

Read more on Wises Business Group: Business plan development

What will be the consequences of payment delays for startups in Germany?

Delays in payment or even non-payment in Germany can have dangerous and unpleasant consequences, particularly when the company in question has not yet generated many sales and does not have good financial resources.

Therefore, managing payments and receivables for businesses in Germany must be done professionally from the beginning, even if it requires a lot of time and money. It is also possible to adjust the payment method in terms and conditions to reduce the risk of delay as much as possible.

Read more on Wise Business Group: Business Formation

With Wise Business Group accounting and financial consulting services, you can have a detailed financial plan for starting and developing your business in Germany. In this way, you will be able to manage the liquidity and finances of your company in the best way and avoid possible risks. Contact us to make an appointment for a consultation.